The confidence level of the UK’s financial services industry is lower than at any point since the financial crisis of the last decade, according to the latest quarterly survey from employers’ organisation the Confederation of British Industry (CBI).
Optimism levels in financial services have not risen for 15 consecutive quarters, i.e. a period of almost four years.
The regular CBI survey involves canvassing around 80 firms and deducting the proportion who feel less optimistic about the overall business situation from the proportion who are more optimistic.
In the September 2019 survey, around 5% said they are more optimistic than they were in June of this year, and approximately 62% said they are less optimistic, meaning that, when rounded to a whole number, the industry’s overall optimism index is minus 56%. In September 2008 this figure was minus 59% and the minus 56% headline figure from the latest survey is the worst figure that has been recorded for 11 years.
The optimism figure is of course a subjective one, but the survey results on business volumes are also poor. In comparison to the second quarter of 2019, 21% of firms said that business volumes had risen, but 36% said they had fallen, giving a rounded balance of -16%, which is the lowest figure since September 2012. Only 9% of firms expect business volumes to be higher in the final quarter of 2019 and 36% predict business volumes will be lower, giving an overall rating of minus 27%.
The profitability figures are the worst the CBI has reported since June 2009, when the effects of the financial crisis were still being felt. 18% said profits in the period from July to September 2019 were higher than they had been in the quarter from April to June. 26% said their profits had fallen, giving a headline figure of minus 8%.
The most positive news in the survey was the rise in employment. 39% of firms said they had more staff than they did three months ago, while 16% said their headcount had reduced. The headline figure of 23% is the best result for more than a year. However, the good news may be short lived, as the number of firms expecting their employee numbers to rise in the next three months is just 8% higher than the number expecting a fall in staffing levels.
The CBI blamed the continuing threat of a no-deal Brexit for the results. Rain Newton-Smith, the organisation’s chief economist, said:
“Quarter after quarter after quarter, optimism continues to drop in the financial services sector. Add to that the dive in volumes and profits over the last three months, and it’s clear something has to change.
“The sector is the jewel in the crown of the UK’s world-leading services industry. While it’s encouraging that investment plans have improved, the threat of a ‘no deal’ Brexit is hitting confidence.
“The UK Government cannot ignore the voice of this bellwether of the domestic economy and one of the UK’s most important globally competitive sectors. No ifs, no buts, the Government must heed the call to avoid a ‘no deal’ Brexit and secure an ambitious deal with our largest trading partner.”
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